The US has raised import tariffs from 10% to 25% on 200bn worth of Chinese goods shipped to US shores and China has vowed to retaliate. In this report, we assess the economic impact of these measures, as well as a scenario where the US-China trade war fully escalates.

China’s economic growth did not disappoint at first glance in the first quarter of 2019. It seems that the previously introduced fiscal and monetary stimulus measures have put a floor under the economic slowdown since the second half of 2018, but it’s too early to cheer about a broad recovery.

We expect global economic growth to weaken further in the coming years. Based on indications on financial markets and weakness in the American housing market, we have penciled in a recession in the US in the course of 2020.

The first months of 2019 show a mixed, but weak picture as far as economic activity is concerned. The National People’s Congress of 2019 focused on emphasizing stability, but this was combined with contradictory goals.

We expect the Japanese economy to recover moderately in the fourth quarter of 2018, and this will continue in the first quarter of 2019, but we do not foresee any surprises from the central bank in terms of policy changes. Inflation has not picked up yet, and risks remain tilted to the downside.

Chinese economic growth continued its decline in the fourth quarter of 2018, bringing the annual growth figure for 2018 to 6.6%. This fits within our view of a gradual economic slowdown, but domestic and external risks are significantly on the rise.

Global growth will decline moderately in the coming years, both in advanced and emerging market economies. Persistent risks such as escalation of the trade war or a disorderly Brexit are a permanent concern in this slowdown.

At their G20 dinner date, the United States and China have agreed to stop imposing new tariffs for a period of 90 days. We regard this as can-kicking at best, and it arguably puts the US in an even stronger position going forward.